```

[Senate Report 113-321]
[From the U.S. Government Publishing Office]

113th Congress} 
 2d Session   }                   SENATE                       {  Report
                                                               { 113-321
_______________________________________________________________________

                                     
 
                                                       Calendar No. 624

        SURFACE TRANSPORTATION BOARD REAUTHORIZATION ACT OF 2014

                               __________

                              R E P O R T

                                 of the

           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                                   on

                                S. 2777

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

               December 12, 2014.--Ordered to be printed
       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
                    one hundred thirteenth congress
                             second session

             JOHN D. ROCKEFELLER IV, West Virginia, Chairman
 BARBARA BOXER, California            JOHN THUNE, South Dakota
 BILL NELSON, Florida                 ROGER F. WICKER, Mississippi
 MARIA CANTWELL, Washington           ROY BLUNT, Missouri
 MARK PRYOR, Arkansas                 MARCO RUBIO, Florida
 CLAIRE McCASKILL, Missouri           KELLY AYOTTE, New Hampshire
 AMY KLOBUCHAR, Minnesota             DEAN HELLER, Nevada
 MARK BEGICH, Alaska                  DANIEL COATS, Indiana
 RICHARD BLUMENTHAL, Connecticut      TIM SCOTT, South Carolina
 BRIAN SCHATZ, Hawaii                 TED CRUZ, Texas
 ED MARKEY, Massachusetts             DEB FISCHER, Nebraska
 CORY BOOKER, New Jersey              RON JOHNSON, Wisconsin
 JOHN WALSH, Montana
                     Ellen Doneski, Staff Director
                     John Williams, General Counsel
              David Schwietert, Republican Staff Director
              Nick Rossi, Republican Deputy Staff Director
               Rebecca Seidel, Republican General Counsel
                                                       Calendar No. 624
113th Congress                                                   Report
                                 SENATE
 2d Session                                                     113-321

======================================================================

        SURFACE TRANSPORTATION BOARD REAUTHORIZATION ACT OF 2014

                                _______
                                

               December 12, 2014.--Ordered to be printed

                                _______
                                

     Mr. Rockefeller, from the Committee on Commerce, Science, and 
                Transportation, submitted the following

                              R E P O R T

                         [To accompany S. 2777]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill (S. 2777) to establish the Surface 
Transportation Board as an independent establishment, and for 
other purposes, having considered the same, reports favorably 
thereon with an amendment (in the nature of a substitute) and 
recommends that the bill (as amended) do pass.

                          Purpose of the Bill

    The purpose of this legislation is to reauthorize the 
Surface Transportation Board for fiscal years (FYs) 2015 
through 2019, and for other purposes.

                          Background and Needs

    The U.S. freight railroad industry has undergone a 
remarkable transformation since the enactment of the Staggers 
Rail Act of 1980 (Staggers Act; P.L. 96-448, 94 Stat. 1895). In 
the decades preceding the enactment of the Staggers Act, 
railroads experienced traffic losses due in part to regulatory 
policies and procedures that prevented railroads from easily 
adjusting their rates to reflect changing market or cost 
environments, which led to financial strain in the industry, 
ultimately resulting in the bankruptcy of many railroads by the 
1970s. The Staggers Act permitted railroads to have more 
freedom to set rates for rail service. More specifically, it 
permitted the railroads to charge lower rates to their 
customers who operate in a competitive environment and higher 
rates to customers who are ``captive'' to one railroad carrier 
for transportation service (i.e., demand-based differential 
pricing). The Staggers Act also lowered many regulatory 
barriers to help the railroads more easily rationalize their 
networks, such as decreasing the difficulty for railroads to 
abandon unprofitable lines. Despite these extensive regulatory 
changes, the Staggers Act still envisioned a role for the 
Federal Government to ensure that captive shippers were not 
subject to unreasonable rates or poor service and invested the 
Interstate Commerce Commission, and later the Surface 
Transportation Board, with the authority to oversee the 
railroad industry.
    Since the Staggers Act was enacted, the industry has 
evolved and the railroads' financial viability has drastically 
improved.\1\ There have been numerous acquisitions and 
consolidations among the larger railroads and a proliferation 
of shortline railroads. There are currently seven Class I 
railroads (BNSF Railway Company, Canadian National Railway 
Company, Canadian Pacific, CSX Transportation Inc., Kansas City 
Southern Railway Company, Norfolk Southern Corporation, and 
Union Pacific Railroad). In 2013, Class I railroads were those 
with operating annual revenue of $467 million or more. Today, 
Class I railroads account for 69 percent of freight rail 
mileage, 90 percent of employees, and 94 percent of revenue. In 
2012, the 7 Class I railroads reported approximately $68 
billion in freight revenues.\2\ In addition to the Class I 
railroads, there are approximately 550 Class II and Class III 
railroads.
---------------------------------------------------------------------------
    \1\See e.g., Senate Committee on Commerce, Science and 
Transportation, Oversight and Investigations Majority Staff Report, 
Update on the Financial State of the Class I Freight Rail Industry 
(Nov. 21, 2013), available at http://www.commerce.senate.gov/public/
?a=Files.Serve&File--id=3cf1b5f2-9487-4c9c-9cea-efb9eb5499d7
    \2\Association of American Railroads, Overview of America's Freight 
Railroads, at 1, July 2014, available at http://www.aar.org/keyissues/
Documents/Background-Papers/Overview.pdf.
---------------------------------------------------------------------------
    The U.S. freight rail industry continues to be integral to 
the Nation's economy and global competitiveness. In the first 
10 months of 2014, the Association of American Railroads (AAR) 
reported that rail carload plus intermodal traffic volume was 
24.3 million units, which represents a 4.5 percent increase 
over the same period the prior year and the highest year-to-
date total since 2007. According to the AAR, October 2014 was 
the best month in history for U.S. rail intermodal traffic.\3\
---------------------------------------------------------------------------
    \3\ Association of American Railroads, AAR's Hamberger: America's 
Rail Industry Taking on Changing Economy, Nov. 20, 2014, available at 
https://www.aar.org/newsandevents/Press-Releases/Pages/AARs-Hamberger-
Americas-Rail-Industry-Taking-on-Changing-Economy.aspx.
---------------------------------------------------------------------------

Surface Transportation Board

    The Federal agency charged with economic oversight of the 
Nation's freight rail system is the Surface Transportation 
Board (STB or Board). The three-member, bipartisan Board has 
regulatory jurisdiction over railroad rate reasonableness, 
mergers, line acquisitions, new rail-line construction, 
abandonments of existing rail lines, and the conversion of rail 
rights-of-way into hiking and biking trails.
    The Board is decisionally independent, although it is 
administratively housed within the U.S. Department of 
Transportation (DOT). Since the economies of freight rail 
regulation are so important to the national economy and involve 
a national network, Congress gave the STB sole jurisdiction 
over rail mergers and consolidations, regulating everything 
from Federal antitrust laws to State and municipal laws. The 
STB also has exclusive authority to determine whether railroad 
rates and services are reasonable.\4\
---------------------------------------------------------------------------
    \4\Surface Transportation Board, Budget Request for FY 2014, 
Overview, pg. 1, Apr. 2013, available at http://www.dot.gov/sites/
dot.dev/files/docs/STB_FY2014_Budget_Estimates.pdf.
---------------------------------------------------------------------------
    The STB's authorization expired in 1998, and the agency has 
remained unauthorized since that time, each year submitting a 
budget request directly to Congress for necessary 
appropriations. It has approximately 170 employees and receives 
a modest annual appropriation that is partially offset with 
collections from filing fees.\5\ In FY 2012, the Board received 
appropriations of $29.3 million for operations and staffing. As 
part of the FY 2014 Omnibus bill, the STB received $31 million 
for its operations and staffing.\6\
---------------------------------------------------------------------------
    \5\ Id. at 2.
    \6\U.S Department of Transportation, Budget Highlights, at 53, 
Fiscal Year 2015, available at http://www.dot.gov/sites/dot.gov/files/
docs/BudgetHighlightsFY2015.pdf.
---------------------------------------------------------------------------
    The STB's major responsibilities related to railroads 
include: overseeing and monitoring railroad commercial 
practices nationally; enforcing the railroads' common-carrier 
obligation; ensuring that rates charged to captive shippers 
(those with no other transportation options) are reasonable; 
monitoring rail carriers to ensure they are able to earn 
adequate returns necessary for the health of the rail system; 
calculating the rail carriers' cost of capital; and approving 
construction and abandonments of rail lines.
    In addition to formal cases brought by shippers, the STB 
has several other programs to help resolve shipper and carrier 
disputes. The vast majority of the complaints lodged against 
the railroads are for service inadequacies, followed by rate 
and car supply concerns.\7\ The STB's Rail Consumer Assistance 
Program (RCAP) helps address these concerns through a more 
informal process. The STB sees this program as beneficial to 
both shippers and carriers, because it places shipper concerns 
immediately before the involved railroad, which can facilitate 
a prompt response and is less burdensome for both parties than 
a formal proceeding. With this program, the parties have an 
opportunity to resolve their issues in an environment that can 
produce a timely and cost-effective result.\8\
---------------------------------------------------------------------------
    \7\Surface Transportation Board, STB Overview, available at http://
www.stb.dot.gov/stb/about/overview.
    \8\ Id.
---------------------------------------------------------------------------

Rail service issues

    Freight rail is an integral component of the recent U.S. 
energy boom. The rapid growth of U.S. shale output, 
particularly in the Bakken region of North Dakota has made 
crude-by-rail an attractive shipping option. Four years ago, 
railroads hauled almost no crude oil. Today, railroads 
transport approximately 800,000 barrels a day, 640,000 of which 
come out of North Dakota.\9\ The exponential increase in the 
movement of crude-by-rail has led to serious rail service 
issues across the country. In addition, a historically harsh 
winter last year caused significant delays and shutdowns of the 
rail system. Coupled with increases in rail traffic and the 
improving economy, service has been impacted throughout the 
country.
---------------------------------------------------------------------------
    \9\Anna Louie Sussman,  Reuters, Analysis: As Alabama Derailment 
Flames Fade, New Oil-by-Rail Questions Arise, Nov. 12, 2013, available 
at http://www.reuters.com/article/2013/11/13/us-oil-train-risks-
analysis-idUSBRE9AC02U20131113; see also Association of American 
Railroads, Moving Crude Oil by Rail, Dec. 2013, available at https://
www.aar.org/keyissues/Documents/Background-Papers/Crude-oil-by-
rail.pdf.
---------------------------------------------------------------------------
    Agricultural commodities in the Northern and Central plains 
have been hit especially hard by rail service issues. Farmers 
have seen delays of weeks, and in some cases months, in getting 
their crops shipped. Many feel that without improved rail 
service they will not be able to get their commodities to 
market and shipping will be more expensive. The situation is 
especially dire because American farmers have traditionally had 
a competitive advantage over foreign producers--such as Brazil 
and Argentina--due to the reliability and cost-effectiveness of 
the U.S. freight network.\10\ With significant delays and 
increased costs, importers of U.S. grains may turn to producers 
in other countries.
---------------------------------------------------------------------------
    \10\Mark Szakonyi,  The Journal of Commerce,  Pain on the Train, 
Aug. 18, 2014, at 10.
---------------------------------------------------------------------------
    In March of 2014, the STB's board members wrote to Canadian 
Pacific and BNSF Railway Company representatives to express 
their concerns that poor rail service was negatively affecting 
agricultural, coal, passenger, and other traffic.\11\ On April 
10, 2014, in response to a significant decline in reliable rail 
service for shippers over the preceding months, the STB held a 
public hearing in Washington, D.C. to address service problems 
affecting the U.S. freight rail network. Given that service 
problems have been particularly acute on the systems of 
Canadian Pacific and BNSF Railway Company, representatives from 
those two companies testified at the hearing.\12\ During the 
hearing, railroad representatives described several factors 
that contributed to the deterioration of rail service, 
including strained track capacity, unexpected volume growth, 
crew shortages, lack of locomotives, severe weather, and 
congestion at major corridors, particularly Chicago.\13\
---------------------------------------------------------------------------
    \11\ See Letters from Daniel R. Elliott III, Chairman, and Ann D. 
Begeman, Vice Chairman, STB, to Carl Ice, President and Chief Executive 
Officer, BNSF Ry. Co. (Feb. 5, 2014) and E. Hunter Harrison, Chief 
Executive Officer and Director Canadian Pacific Ry Co. (Mar. 6, 2014), 
available at http://stb.dot.gov.
    \12\Surface Transportation Board,  News Release, Surface 
Transportation Board to Hold Hearing on Rail Service Issues, Apr. 1, 
2014, available at http://www.stb.dot.gov/newsrels.nsf.html.
    \13\Progressive Railroading, STB Schedules September Hearing in 
North Dakota to Address Rail Service Issues, Aug. 19, 2014, available 
at http://www.progressiverailroading.com/bnsf_railway/STB-schedules-
September-hearing-to-address-rail-service.
---------------------------------------------------------------------------
    At the hearing, farmers and agricultural producers 
expressed concern about delayed fertilizer deliveries, 
backlogged grain car orders, and delayed shipments of loaded 
grain cars. There were a number of impacts as a result, 
including: little to no storage capacity at many grain 
elevators; stored grain spoiling; lost sales; penalties 
incurred by grain shippers for products not delivered on time; 
and buyers shifting to foreign suppliers.\14\ Also at the 
hearing, representatives from other industries, such as coal, 
chemicals, feed, sugar, and paper expressed similar supply 
chain disruptions.\15\
---------------------------------------------------------------------------
    \14\Surface Transportation Board, Notice: United States Rail 
Service Issues-Grain, Docket No. EP 724 (Sub-No.2), Aug. 18, 2014, at 
3.
    \15\ Id.
---------------------------------------------------------------------------
    Subsequent to the hearing, on April 15, 2014, the STB 
directed Canadian Pacific and BNSF Railway Company to provide 
plans to ensure delivery of fertilizer shipments, as well as 
provide status reports of the fertilizer shipments over a six-
week period.\16\ In response, BNSF Railway Company added rail 
cars to the existing fertilizer service fleet and allowed 
locomotives to remain with fertilizer cars during loading and 
unloading in an effort to reduce potential delays and expedite 
turn-around times.\17\
---------------------------------------------------------------------------
    \16\U.S. Rail Serv. Issues, EP 724 (Sub-No. 1), slip op. at 1 (STB 
served Apr. 15, 2014).
    \17\ Id.
---------------------------------------------------------------------------
    Since their guidance in April, the STB has closely 
monitored Canadian Pacific's and BNSF Railway Company's 
progress in moving the 2013 crop. On June 20, 2014, in 
recognition of the limited amount of time until next harvest 
and the large quantities of grain that still needs to be moved, 
the Board again directed Canadian Pacific and BNSF Railway 
Company to provide and/or update their plans to reduce unfilled 
grain car orders, to resolve grain car delays, and to provide 
weekly status reports on the movement of grain on their 
networks.\18\ According to the STB, BNSF Railway Company has 
made considerable progress in reducing not only the number of 
backlogged orders, but also the average number of days late for 
these orders.\19\ BNSF Railway Company has also committed to 
substantial infrastructure improvements and the reallocation of 
resources to improve service.\20\
---------------------------------------------------------------------------
    \18\U.S. Rail Serv. Issues-Grain, EP 724 (Sub-No.2), slip op. at 3 
(STB served June 20, 2014).
    \19\BNSF Status Report, Attachment C, U.S. Rail Serv. Issues-Grain, 
EP 724 (Sub-No. 2) (filed Aug. 8, 2014), noting that most of BNSF's 
remaining backlogged orders are now less than 20 days late, and the 
majority of those orders are less than 10 days late; see also JOC 
article.
    \20\BNSF Hr'G Ex. 19, U.S. Rail Serv. Issues-Grain, EP 724 (Sub-
No.2) (filed Apr. 10, 2014).
---------------------------------------------------------------------------
    Without improved rail service, shippers are concerned that 
they will not be able to get their commodities to market, and 
prices, which are already low due to above average harvests, 
will fall further. Shortages of rail equipment are also forcing 
farmers to the secondary market for grain hopper cars, adding 
in some instances thousands of dollars per shipment.\21\ If 
agricultural shippers are not able to move their product, the 
risk is that U.S. grain importers, such as Japan, South Korea, 
and China, may turn to agricultural producers in Brazil and 
Argentina at lower prices.\22\
---------------------------------------------------------------------------
    \21\Szakonyi, supra note 10, at 10.
    \22\ Id.
---------------------------------------------------------------------------
    The agricultural sector is not the only industry 
experiencing rail service issues. Coal-fired utilities, ethanol 
manufacturers, propane shippers, and others in the energy 
industry have voiced concerns throughout 2014 about unreliable 
service and growing wait times for rail cars.\23\ The auto 
industry has also alleged that rail service delays have cost 
manufacturers millions of dollars in storage fees, alternate 
transport costs, and vehicle shortages at dealerships. While a 
particularly severe winter has been responsible for some rail 
service delays, the auto industry contends that additional 
factors have exacerbated the service disruptions, including a 
shortage of railcars and an inadequate response to ameliorate 
this shortage, the annual month-over-month growth in auto 
production and auto exports, and the boom in crude oil shipped 
by rail. Amtrak's passenger service between Chicago and Seattle 
and Portland on the Empire Builder has also been greatly 
affected by freight rail congestion in the Northern Plains. 
These delays are beginning to adversely affect Amtrak's 
ridership on that line.
---------------------------------------------------------------------------
    \23\ See e.g., Xcel Energy Comments, U.S. Rail Serv. Issues, EP 724 
(filed July 31, 2014) (expressing concern over BNSF's ability to 
deliver sufficient coal to Xcel Energy's electric generating stations).
---------------------------------------------------------------------------
    In response, the AAR, on behalf of its freight rail members 
has acknowledged that a series of events, including a harsh 
winter, a record grain harvest, unexpected demand for grain 
exports, and higher coal usage by utility providers, have 
affected rail service across the country. Despite these 
challenges, the AAR contends that freight railroads continue to 
move vast volumes of goods safely and efficiently.

                         Summary of Provisions

    S. 2777, the Surface Transportation Board Reauthorization 
Act of 2014, would establish the Board as an independent agency 
outside of the DOT. The bill would give the Inspector General 
(IG) of the DOT authority to review the financial management, 
property management, and business operations of the Board. The 
bill would expand the membership of the Board from three to 
five members and eliminate a current one-year holdover 
limitation for a Board member when a successor is not 
immediately appointed. The bill would provide for limited 
instances in which a majority of Board members can communicate 
without the requirement of a full public meeting, but still 
with public disclosure.
    Currently, the STB has limited investigative authority. 
This bill allows the STB to initiate investigations, except for 
rate proceedings which would still require a formal complaint. 
This bill would also codify recent work of the STB to 
streamline the process for rate cases and ensure that simple 
reviews are accompanied by expedited handling. The bill also 
codifies a number of timelines for stand-alone cost rate cases, 
including discovery (150 days), development of evidentiary 
record (155 days), closing brief (60 days), and final Board 
decision (180 days). The bill would require the STB to initiate 
a proceeding on whether contract bundling has had an adverse 
impact on the ability of shippers, especially captive shippers, 
to bring rate cases. The legislation would also require the STB 
to issue a report which analyzes whether current large rate 
case methodologies are sufficient, not unduly complex, and cost 
effective, and a discussion of alternative methodologies.
    The bill would require the STB to promulgate regulations 
establishing a voluntary, but binding, arbitration process for 
rates, demurrage, accessorial charges, misrouting, and disputes 
on rules and practices. Arbitration for rate cases would only 
be available if the rail carrier has market dominance. 
Arbitration would not apply to license disputes, industry-wide 
regulation disputes, or disputes solely between carriers. The 
arbitration process would cap relief at $2 million for service 
and practice disputes and $25 million for rate dispute damages. 
The bill would allow the STB to review an arbitration decision 
only if a clear abuse of arbitral authority or discretion 
occurred, the decision directly contravenes statute, or the 
award limitation was violated.
    The bill would require the STB to establish a database of 
the formal and informal service complaints it receives. The 
database would include the type, geographic origin, and 
resolution of each complaint. The STB would be required to 
provide quarterly reports to the Committee on Commerce, 
Science, and Transportation of the Senate and the Committee on 
Transportation and Infrastructure of the House of 
Representatives about the complaints it receives. The bill 
would require the STB to submit quarterly reports to both of 
the Committees on the Board's progress towards unfinished 
regulatory proceedings.
    The bill would establish a sense of Congress that the STB 
should: consider the costs and benefits of revenue adequacy 
determinations for Class I railroads; review the methodology 
for determinations of revenue adequacy; determine the need for 
a proceeding on competitive switching; and determine whether a 
timely rulemaking for competitive switching is needed.

                          Legislative History

    Senators Rockefeller and Thune introduced S. 2777 on 
September 8, 2014. On September 17, 2014, the Committee met in 
Executive Session during which S. 2777 was considered. One 
amendment, in the nature of a substitute, was offered by 
Senators Rockefeller and Thune. The bill, as amended, was 
reported favorably by voice vote.

                            Estimated Costs

    In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:

S. 2777--Surface Transportation Board Reauthorization Act of 2014

    Summary: S. 2777 would authorize the programs of the 
Surface Transportation Board (STB), establish the STB as an 
independent government agency outside the auspices of the 
Department of Transportation (DOT), and authorize other changes 
in the agency's operations. Based on information from the DOT, 
CBO estimates that implementing the bill would cost $164 
million over the 2015-2019 period, assuming the appropriation 
of the amounts authorized and estimated to be necessary.
    Enacting S. 2777 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    S. 2777 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary effect of S. 2777 is shown in the following table. 
The costs of this legislation fall within budget function 400 
(transportation).

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                                                                          2015-
                                                              2015     2016     2017     2018     2019     2019
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION
 
Surface Transportation Board:
    Authorization Levela..................................        3       35       36       36       36      146
    Estimated Outlays.....................................        2       33       36       36       36      143
Additional Activities by Surface Transportation Board and
 DOT Inspector General:
    Estimated Authorization Level.........................        2        5        5        5        5       22
    Estimated Outlays.....................................        1        5        5        5        5       21
    Total Changes:
        Estimated Authorization Level.....................        5       40       41       41       41      168
        Estimated Outlays.................................        3       38       41       41       41      164
----------------------------------------------------------------------------------------------------------------
Note: DOT = Department of Transportation.
aThe legislation would authorize the appropriation of $33 million in 2015, but $30 million (on an annualized
  basis) has already been appropriated for the agency in 2015.

    Basis of estimate: For this estimate, CBO assumes the bill 
will be enacted by the end of calendar year 2014 and that the 
amounts authorized and estimated to be necessary will be 
appropriated.
    S. 2777 would specifically authorize the appropriation of 
an additional $176 million for the operation of the STB over 
the 2015-2019 period. The STB received an appropriation of $30 
million in fiscal year 2014 and the same amount (on an 
annualized basis) in the Continuing Appropriations Resolution, 
2015 (Public Law 113-164).
    According to the board, the requirements in the bill to 
expand the number of board members and their associated staff, 
to allow it to initiate proceedings against companies, and to 
make it independent of the Department of Transportation (DOT) 
would impose additional costs on the board. S. 2777 also would 
authorize the appropriation of such sums as necessary for DOT's 
Inspector General to investigate certain aspects of the STB's 
operations. CBO estimates those additional responsibilities 
would cost $5 million a year in addition to the amounts 
specifically authorized in the bill. Those additional amounts 
would be primarily for salaries and benefits for additional 
employees hired over the 2015-2016 period. In total, CBO 
estimates implementing S. 2777 would cost $164 million over the 
2015-2019 period.
    Pay-As-You-Go considerations: None.
    Intergovernmental and private-sector impact: S. 2777 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Estimate prepared by: Federal costs: Sarah Puro; Impact on 
state, local, and tribal governments: Melissa Merrell; Impact 
on the private sector: Amy Petz.
    Estimate approved by: Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                           Regulatory Impact

    In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following evaluation of the regulatory impact of the 
legislation, as reported:

                       number of persons covered

    S. 2777 is intended to improve the efficiency of the STB by 
making modifications to the STB's existing statutory authority. 
The bill would codify actions already undertaken by the STB, 
improve the process for rate cases, and expedite review 
timelines, which will have no effect on the number of 
individuals regulated. For railroads and shippers, the 
efficiencies at the STB may reduce the cost of compliance. S. 
2777 also would give the STB the authority to initiate 
investigations; however, the investigations would still need to 
be within the scope of their existing authority, which would 
not expand the persons covered. Finally, S. 2777 would require 
the STB to initiate a proceeding on rate bundling, and would 
include a sense of Congress that the STB should consider 
additional proceedings. These provisions do not mandate that 
the STB complete the proceeding, and in fact, it may determine 
that no regulatory changes are necessary, which would not 
expand the scope of covered persons.

                            economic impact

    S. 2777 is expected to have a positive impact on the U.S. 
economy. The bill would improve inefficiencies at the STB and 
speed time delays in the case review process. The bill would 
allow for the STB to better assist shippers and railroads, 
helping to ensure rail service problems are addressed in a 
balanced and timely manner. These improvements would have 
helpful economic benefits, such as helping businesses to get 
goods to market more efficiently.

                                privacy

    The reported bill is not expected to have any impact on the 
privacy rights of individuals.

                               paperwork

    It is not anticipated that there would be a major increase 
in paperwork burdens resulting from the enactment of S. 2777.

                   Congressionally Directed Spending

    In compliance with paragraph 4(b) of rule XLIV of the 
Standing Rules of the Senate, the Committee provides that no 
provisions contained in the bill, as reported, meet the 
definition of congressionally directed spending items under the 
rule.

                      Section-by-Section Analysis

Section 1. Short title.

    The bill would be titled the ``Surface Transportation Board 
Reauthorization Act of 2014.''

Section 2. References to title 49, United States Code.

    Changes made in this bill, except where expressly provided 
otherwise, would be made to title 49 of the United States Code.

Section 3. Establishment of Surface Transportation Board as an 
        independent establishment.

    This section would amend administrative provisions to 
clarify the STB's role as an independent body and would specify 
that submissions or transmissions of budgetary or legislative 
matters be submitted concurrently to the President/Office of 
Management and Budget and the Committee on Commerce, Science, 
and Transportation of the Senate and the Committee on 
Transportation and Infrastructure of the House of 
Representatives. Also, this section would repeal a section 
requiring the DOT to provide administrative support, which 
should save the STB approximately $300,000 annually. This 
section would give the IG of the DOT authority to review the 
financial management, property management, and business 
operations of the Board.

Section 4. Surface Transportation Board membership.

    This section would expand membership of the STB from three 
members to five in order to address inefficient quorum 
requirements. Also, this section would eliminate the one-year 
holdover limitation for continuing service by a Board member 
when a successor is not immediately appointed.

Section 5. Nonpublic collaborative discussions.

    This section would provide for limited instances where a 
majority of Board members can communicate without requiring a 
full public meeting, similar to what the Federal Communications 
Commission enjoys. Such instances would require that no vote be 
taken and the general counsel's presence, and would include 
only Board members or staff. Also, this section would require 
disclosure of meeting topics and participants within two 
business days of the meeting, unless the discussion relates to 
an ongoing proceeding, in which case the disclosure would be 
made on the date of the final Board decision.

Section 6. Investigative authority.

    This section would allow the STB to initiate 
investigations; current policy only allows investigations upon 
complaint. This new authority would be prohibited for rate 
proceedings, which would still require a complaint.

Section 7. Procedures for rate cases.

    This section would codify work the STB has already been 
doing to streamline its processes for rate cases and ensure 
that the simplified reviews are accompanied by expedited 
handling.

Section 8. Rate review timelines.

    This section would codify timelines for stand-alone cost 
rate challenges, including discovery (150 days), development of 
evidentiary record (155 days), closing brief (60 days), and 
final Board decision (180 days) while providing an option for a 
Board-granted extension upon request or in the interest of due 
process. The timelines are currently set through regulation.

Section 9. Effect of rate bundling.

    This section would require the STB to initiate a proceeding 
on whether contract bundling has had an adverse impact on the 
ability of shippers, especially captive shippers, to bring rate 
cases.

Section 10. Report on rate case methodology.

    This section would require a report, within one year, 
analyzing whether current large rate case methodologies are 
sufficient, not unduly complex, and cost effective, and a 
discussion of possible alternative methodologies.

Section 11. Arbitration of certain rail rates, practices, and common 
        carrier service expectation disputes.

    This section would continue work the STB has already begun 
in encouraging and providing arbitration and mediation for 
dispute resolution. The section would require the STB to 
promulgate regulations establishing a voluntary arbitration 
process for rates, demurrage, accessorial charges, misrouting, 
and disputes on rules and practices. Either party would be able 
to trigger the voluntary arbitration process after a complaint 
has been filed or after the conclusion of any informal dispute 
resolution process provided by the STB. While partaking in the 
arbitration process would be voluntary, arbitration decisions 
would be binding.
    Arbitration for rate disputes would be available only if 
the rail carrier has market dominance. Arbitration would not 
apply to license disputes, industry-wide regulation disputes, 
or disputes solely between rail carriers.
    This section would set forth terms that require any 
arbitration decision to be in writing, contain findings of fact 
and conclusions, and bind the parties. In addition, the statute 
would specify timelines for arbitrator selection (14 days after 
initiation), evidentiary process (90 days), and decision (30 
days after evidentiary record closes), subject to discretionary 
extensions.
    Relief would be capped at $2 million for service and 
practice disputes and $25 million for rate dispute damages. Any 
rate prescription from arbitration would be limited to not 
longer than five years from the date of the decision. The Board 
would be able to review an arbitration only if a clear abuse of 
arbitral authority or discretion occurred, the decision 
directly contravenes statute, or the award limitation was 
violated.

Section 12. Compilation of complaints at Surface Transportation Board.

    This section would require the STB to establish a database 
of the formal and informal service complaints it receives. The 
database would be required to include the type, geographic 
origin, and resolution of each complaint. The STB would be also 
required to begin providing quarterly reports to the Committee 
on Commerce, Science, and Transportation of the Senate and the 
Committee on Transportation and Infrastructure of the House of 
Representatives within 60 days of this Act's enactment. The 
report would then be posted on the Board's website, but 
identifying information of a complainant could only be included 
if written consent is obtained.

Section 13. Quarterly reports.

    The STB would also be required to begin providing quarterly 
reports to the Committee on Commerce, Science, and 
Transportation of the Senate and the Committee on 
Transportation and Infrastructure of the House of 
Representatives within 60 days of this Act's enactment 
regarding the Board's progress toward addressing unfinished 
regulatory proceedings.

Section 14. Sense of Congress.

    This section would provide the sense of Congress that the 
STB should: consider the costs and benefits of revenue adequacy 
determinations for Class I railroads; review the methodology 
for determinations of revenue adequacy; determine the need for 
a proceeding on competitive switching; and determine whether a 
timely rulemaking for competitive switching is needed. This 
section would be limited to a sense of Congress, because the 
STB already has ongoing proceeding regarding these matters and 
any new statutory mandates could require the STB to begin their 
work anew.

Section 15. Authorization of appropriations.

    This section would authorize appropriations for FY 2015 
through FY 2019 for the STB. Authorization levels are based on 
appropriate funding levels to carry out the new 
responsibilities, powers, and requirements of this bill.

Section 16. Repeal of expired and obsolete provisions.

    This section would allow for a rail carrier's agent to be 
located outside of Washington, DC.

Section 17. Construction.

    This section would make clear that nothing in the bill 
would affect any cases being considered by the STB at the time 
of enactment.

                        Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
material is printed in italic, existing law in which no change 
is proposed is shown in roman):

                        TITLE 49. TRANSPORTATION

                SUBTITLE I. DEPARTMENT OF TRANSPORTATION

                CHAPTER 7. SURFACE TRANSPORTATION BOARD

                      SUBCHAPTER I. ESTABLISHMENT

Sec. 701. Establishment of Board

  [(a) Establishment.--There is hereby established within the 
Department of Transportation the Surface Transportation Board.]
  (a) Establishment.--The Surface Transportation Board is an 
independent establishment of the United States Government.
  (b) Membership.--
          (1) The Board shall consist of [3 members] 5 members, 
        to be appointed by the President, by and with the 
        advice and consent of the Senate. Not more than [2 
        members] 3 members may be appointed from the same 
        political party.
          [(2) At any given time, at least 2 members of the 
        Board shall be individuals with professional standing 
        and demonstrated knowledge in the fields of 
        transportation or transportation regulation, and at 
        least one member shall be an individual with 
        professional or business experience (including 
        agriculture) in the private sector.]
          (2) At any given time, at least 3 members of the 
        Board shall be individuals with professional standing 
        and demonstrated knowledge in the fields of 
        transportation, transportation regulation, or economic 
        regulation, and at least 2 members shall be individuals 
        with professional or business experience (including 
        agriculture or other rail customers) in the private 
        sector.
          (3) The term of each member of the Board shall be 5 
        years and shall begin when the term of the predecessor 
        of that member ends. An individual appointed to fill a 
        vacancy occurring before the expiration of the term for 
        which the predecessor of that individual was appointed, 
        shall be appointed for the remainder of that term. When 
        the term of office of a member ends, the member may 
        continue to serve until a successor is appointed and 
        [qualified, but for a period not to exceed one year] 
        qualified. The President may remove a member for 
        inefficiency, neglect of duty, or malfeasance in 
        office.
          [(4) On January 1, 1996, the members of the 
        Interstate Commerce Commission serving unexpired terms 
        on December 29, 1995, shall become members of the 
        Board, to serve for a period of time equal to the 
        remainder of the term for which they were originally 
        appointed to the Interstate Commerce Commission. Any 
        member of the Interstate Commerce Commission whose term 
        expires on December 31, 1995, shall become a member of 
        the Board, subject to paragraph (3).]
          [(5)](4) No individual may serve as a member of the 
        Board for more than 2 terms. [In the case of an 
        individual who becomes a member of the Board pursuant 
        to paragraph (4), or an individual] In the case of an 
        individual appointed to fill a vacancy occurring before 
        the expiration of the term for which the predecessor of 
        that individual was appointed, such individual may not 
        be appointed for more than one additional term.
          [(6)](5) A member of the Board may not have a 
        pecuniary interest in, hold an official relation to, or 
        own stock in or bonds of, a carrier providing 
        transportation by any mode and may not engage in 
        another business, vocation, or employment.
          [(7)](6) A vacancy in the membership of the Board 
        does not impair the right of the remaining members to 
        exercise all of the powers of the Board. The Board may 
        designate a member to act as Chairman during any period 
        in which there is no Chairman designated by the 
        President.
  (c) Chairman.--
          (1) There shall be at the head of the Board a 
        Chairman, who shall be designated by the President from 
        among the members of the Board. The Chairman shall 
        receive compensation at the rate prescribed for level 
        III of the Executive Schedule under section 5314 of 
        title 5.
          (2) Subject to the general policies, decisions, 
        findings, and determinations of the Board, the Chairman 
        shall be responsible for administering the Board. The 
        Chairman may delegate the powers granted under this 
        paragraph to an officer, employee, or office of the 
        Board. The Chairman shall--
                  (A) appoint and supervise, other than regular 
                and full-time employees in the immediate 
                offices of another member, the officers and 
                employees of the Board, including attorneys to 
                provide legal aid and service to the Board and 
                its members, and to represent the Board in any 
                case in court;
                  (B) appoint the heads of offices with the 
                approval of the Board;
                  (C) distribute Board business among officers 
                and employees and offices of the Board;
                  (D) prepare requests for appropriations for 
                the Board and submit those requests to the 
                President and Congress with the prior approval 
                of the Board; and
                  (E) supervise the expenditure of funds 
                allocated by the Board for major programs and 
                purposes.

Sec. 703. Administrative provisions

  [(a) Executive Reorganization.--Chapter 9 of title 5, United 
States Code, shall apply to the Board in the same manner as it 
does to an independent regulatory agency, and the Board shall 
be an establishment of the United States Government.]
  [(b) Open Meetings.--For purposes of section 552b of title 5, 
United States Code, the Board shall be deemed to be an agency.]
  (a) Open Meetings.--
          (1) In general.--The Board shall be deemed to be an 
        agency for purposes of section 552b of title 5.
          (2) Nonpublic collaborative discussions.--
                  (A) In general.--Notwithstanding section 552b 
                of title 5, a majority of the members may hold 
                a meeting that is not open to public 
                observation to discuss official agency business 
                if--
                          (i) no vote or other disposition of 
                        official agency business is taken at 
                        the meeting;
                          (ii) each individual present at the 
                        meeting is a member or an employee of 
                        the Board; and
                          (iii) the General Counsel of the 
                        Board is present at the meeting.
                  (B) Disclosure of nonpublic collaborative 
                discussions.--Except as provided under 
                subparagraph (C), not later than 2 business 
                days after the conclusion of a meeting under 
                subparagraph (A), the Board shall make 
                available to the public, in a place easily 
                accessible to the public--
                          (i) a list of the individuals present 
                        at the meeting; and
                          (ii) a summary of the matters 
                        discussed at the meeting, except for 
                        any matters the Board properly 
                        determines may be withheld from the 
                        public under section 552b(c) of title 
                        5.
                  (C) Ongoing proceedings.--If a discussion 
                under subparagraph (A) relates, directly or 
                indirectly, to an ongoing proceeding before the 
                Board, the Board shall make the disclosure 
                under subparagraph (B) on the date of the final 
                Board decision.
                  (D) Preservation of open meetings 
                requirements for agency action.--Nothing in 
                this paragraph shall limit the applicability of 
                section 552b of title 5 with respect to a 
                meeting of the members other than that 
                described in this paragraph.
                  (E) Statutory construction.--Nothing in this 
                paragraph--
                          (i) shall limit the applicability of 
                        section 552b of title 5 with respect to 
                        any information which is proposed to be 
                        withheld from the public under 
                        subparagraph (B)(ii); and
                          (ii) authorizes the Board to withhold 
                        from any individual any record that is 
                        accessible to that individual under 
                        section 552a of title 5, United States 
                        Code.
  [(c) Independence.--In the performance of their functions, 
the members, employees, and other personnel of the Board shall 
not be responsible to or subject to the supervision or 
direction of any officer, employee, or agent of any other part 
of the Department of Transportation.]
  [(d)](b) Representation by Attorneys.--Attorneys designated 
by the Chairman of the Board may appear for, and represent the 
Board in, any civil action brought in connection with any 
function carried out by the Board pursuant to this chapter or 
subtitle IV or as otherwise authorized by law.
  [(e)](c) Admission to Practice.--Subject to section 500 of 
title 5, the Board may regulate the admission of individuals to 
practice before it and may impose a reasonable admission fee.
  [(f) Budget Requests.--In each annual request for 
appropriations by the President, the Secretary of 
Transportation shall identify the portion thereof intended for 
the support of the Board and include a statement by the Board--
          [(1) showing the amount requested by the Board in its 
        budgetary presentation to the Secretary and the Office 
        of Management and Budget; and
          [(2) an assessment of the budgetary needs of the 
        Board.
  [(g) Direct Transmittal to Congress.--The Board shall 
transmit to Congress copies of budget estimates, requests, and 
information (including personnel needs), legislative 
recommendations, prepared testimony for congressional hearings, 
and comments on legislation at the same time they are sent to 
the Secretary of Transportation. An officer of an agency may 
not impose conditions on or impair communications by the Board 
with Congress, or a committee or Member of Congress, about the 
information.]
  (d) Submissions and Transmittals.--Whenever the Board submits 
or transmits any budget estimate, budget request, supplemental 
budget estimate, or other budget information, legislative 
recommendation, prepared testimony for a congressional hearing, 
or comment on legislation to the President or to the Office of 
Management and Budget, it shall concurrently transmit a copy 
thereof to the Committee on Commerce, Science, and 
Transportation of the Senate and the Committee on 
Transportation and Infrastructure of the House of 
Representatives. No officer or agency of the United States 
shall have any authority to require the Board to submit its 
budget estimates or requests, legislative recommendations, 
prepared testimony for congressional hearings, or comments on 
legislation to any officer or agency of the United States for 
approval, comments, or review, prior to the submission of the 
recommendations, testimony, or comments to Congress.

Sec. 704. [Annual report] Reports

  (a) Annual Report.--The Board shall annually transmit to the 
Congress a report [on its activities.] on its activities, 
including each instance in which the Board has initiated an 
investigation on its own initiative under this chapter or 
subtitle IV.
  (b) Complaints.--
          (1) In general.--The Board shall establish and 
        maintain a database of complaints received by the 
        Board.
          (2) Quarterly reports.--The Board shall post a 
        quarterly report of formal and informal service 
        complaints received by the Board during the previous 
        quarter that includes--
                  (A) a list of the type of each complaint;
                  (B) the geographic region of each complaint; 
                and
                  (C) the resolution of each complaint, if 
                appropriate.
          (3) Written consent.--The quarterly report may 
        identify a complainant that submitted an informal 
        complaint only upon the written consent of the 
        complainant.
          (4) Website posting.--Each quarterly report shall be 
        posted on the Board's public website.

Sec. 705. Authorization of appropriations

  There are authorized to be appropriated for the activities of 
the Board--
          [(1) $ 8,421,000 for fiscal year 1996;
          [(2) $ 12,000,000 for fiscal year 1997; and
          [(3) $ 12,000,000 for fiscal year 1998.]
           (1) $33,000,000 for fiscal year 2015;
          (2) $35,000,000 for fiscal year 2016;
          (3) $35,500,000 for fiscal year 2017;
          (4) $35,500,000 for fiscal year 2018; and
          (5) $36,000,000 for fiscal year 2019.

                SUBTITLE I. DEPARTMENT OF TRANSPORTATION

                CHAPTER 7. SURFACE TRANSPORTATION BOARD

                     SUBCHAPTER II. ADMINISTRATIVE

Sec. 723. Service of notice in Board proceedings

  (a) Designation of Agent.--A carrier providing transportation 
subject to the jurisdiction of the Board under subtitle IV 
shall designate an agent [in the District of Columbia,] on whom 
service of notices in a proceeding before, and of actions of, 
the Board may be made.
  (b) Filing and Changing Designations.--A designation under 
subsection (a) shall be in writing and filed with the Board. 
The designation may be changed at any time in the same manner 
as originally made.
  (c) Service of Notice.--Except as otherwise provided, notices 
of the Board shall be served on its designated agent at the 
office or usual place of residence [in the District of 
Columbia] of that agent. A notice of action of the Board shall 
be served immediately on the agent or in another manner 
provided by law. If that carrier does not have a designated 
agent, service may be made by posting the notice in the office 
of the Board.
  (d) Special Rule for Rail Carriers.--In a proceeding 
involving the lawfulness of classifications, rates, or 
practices of a rail carrier that has not designated an agent 
under this section, service of notice of the Board on an 
attorney in fact for the carrier constitutes service of notice 
on the carrier.

Sec. 724. Service of process in court proceedings

  (a) Designation of Agent.--A carrier providing transportation 
subject to the jurisdiction of the Board under subtitle IV 
shall designate an agent [in the District of Columbia] on whom 
service of process in an action before a district court may be 
made. Except as otherwise provided, process in an action before 
a district court shall be served on the designated agent of 
that carrier at the office or usual place of residence [in the 
District of Columbia] of that agent. If the carrier does not 
have a designated agent, service may be made by posting the 
notice in the office of the Board.
  (b) Changing Designation.--A designation under this section 
may be changed at any time in the same manner as originally 
made.
          

[Sec. 725. Administrative support

  [The Secretary of Transportation shall provide administrative 
support for the Board.]

Sec. 727. Authority of the Inspector General.--

  (a) In General.--The Inspector General of the Department of 
Transportation, in accordance with the mission of the Inspector 
General to prevent and detect fraud and abuse, shall have 
authority to review only the financial management, property 
management, and business operations of the Surface 
Transportation Board, including internal accounting and 
administrative control systems, to determine compliance with 
applicable Federal laws, rules, and regulations.
  (b) Duties.--In carrying out this section, the Inspector 
General shall--
          (1) keep the Chairman of the Board and the Committee 
        on Commerce, Science, and Transportation of the Senate 
        and the Committee on Transportation and Infrastructure 
        of the House of Representatives fully and currently 
        informed about problems relating to administration of 
        the internal accounting and administrative control 
        systems of the Board;
          (2) issue findings and recommendations for actions to 
        address such problems; and
          (3) report periodically to the Committee on Commerce, 
        Science, and Transportation of the Senate and the 
        Committee on Transportation and Infrastructure of the 
        House of Representatives on any progress made in 
        implementing actions to address such problems.
  (c) Access to Information.--In carrying out this section, the 
Inspector General may exercise authorities granted to the 
Inspector General under subsections (a) and (b) of section 6 of 
the Inspector General Act of 1978 (5 U.S.C. App.).
  (d) Authorization of Appropriations.--
          (1) Funding.--There are authorized to be appropriated 
        to the Secretary of Transportation for use by the 
        Inspector General of the Department of Transportation 
        such sums as may be necessary to cover expenses 
        associated with activities pursuant to the authority 
        exercised under this section.
          (2) Reimbursable agreement.--In the absence of an 
        appropriation under this subsection for an expense 
        referred to in paragraph (1), the Inspector General and 
        the Board shall have a reimbursable agreement to cover 
        such expense.

Sec. [727]728. Definitions

  All terms used in this chapter that are defined in subtitle 
IV shall have the meaning given those terms in that subtitle.

                 SUBTITLE IV. INTERSTATE TRANSPORTATION

                              PART A. RAIL

                           CHAPTER 107. RATES

                    SUBCHAPTER I. GENERAL AUTHORITY

Sec. 10701. Standards for rates, classifications, through routes, 
                    rules, and practices

  (a) A through route established by a rail carrier must be 
reasonable. Divisions of joint rates by rail carriers must be 
made without unreasonable discrimination against a 
participating carrier and must be reasonable.
  (b) A rail carrier providing transportation subject to the 
jurisdiction of the Board under this part may not discriminate 
in its rates against a connecting line of another rail carrier 
providing transportation subject to the jurisdiction of the 
Board under this part or unreasonably discriminate against that 
line in the distribution of traffic that is not routed 
specifically by the shipper.
  (c) Except as provided in subsection (d) of this section and 
unless a rate is prohibited by a provision of this part, a rail 
carrier providing transportation subject to the jurisdiction of 
the Board under this part may establish any rate for 
transportation or other service provided by the rail carrier.
  (d)(1) If the Board determines, under section 10707 of this 
title, that a rail carrier has market dominance over the 
transportation to which a particular rate applies, the rate 
established by such carrier for such transportation must be 
reasonable.
          (2) In determining whether a rate established by a 
        rail carrier is reasonable for purposes of this 
        section, the Board shall give due consideration to--
                  (A) the amount of traffic which is 
                transported at revenues which do not contribute 
                to going concern value and the efforts made to 
                minimize such traffic;
                  (B) the amount of traffic which contributes 
                only marginally to fixed costs and the extent 
                to which, if any, rates on such traffic can be 
                changed to maximize the revenues from such 
                traffic; and
                  (C) the carrier's mix of rail traffic to 
                determine whether one commodity is paying an 
                unreasonable share of the carrier's overall 
                revenues,
        recognizing the policy of this part that rail carriers 
        shall earn adequate revenues, as established by the 
        Board under section 10704(a)(2) of this title.
          [(3) The Board shall, within one year after January 
        1, 1996, complete the pending Interstate Commerce 
        Commission non-coal rate guidelines proceeding to 
        establish a simplified and expedited method for 
        determining the reasonableness of challenged rail rates 
        in those cases in which a full stand-alone cost 
        presentation is too costly, given the value of the 
        case.]
          (3) The Board shall maintain a simplified and 
        expedited method for determining the reasonableness of 
        challenged rates in those cases in which a full stand-
        alone cost presentation is too costly, given the value 
        of the case.

Sec. 10704. Authority and criteria: rates, classifications, rules, and 
                    practices prescribed by board

  (a)(1) When the Board, after a full hearing, decides that a 
rate charged or collected by a rail carrier for transportation 
subject to the jurisdiction of the Board under this part, or 
that a classification, rule, or practice of that carrier, does 
or will violate this part, the Board may prescribe the maximum 
rate, classification, rule, or practice to be followed. The 
Board may order the carrier to stop the violation. When a rate, 
classification, rule, or practice is prescribed under this 
subsection, the affected carrier may not publish, charge, or 
collect a different rate and shall adopt the classification and 
observe the rule or practice prescribed by the Board.
          (2) The Board shall maintain and revise as necessary 
        standards and procedures for establishing revenue 
        levels for rail carriers providing transportation 
        subject to its jurisdiction under this part that are 
        adequate, under honest, economical, and efficient 
        management, to cover total operating expenses, 
        including depreciation and obsolescence, plus a 
        reasonable and economic profit or return (or both) on 
        capital employed in the business. The Board shall make 
        an adequate and continuing effort to assist those 
        carriers in attaining revenue levels prescribed under 
        this paragraph. Revenue levels established under this 
        paragraph should--
                  (A) provide a flow of net income plus 
                depreciation adequate to support prudent 
                capital outlays, assure the repayment of a 
                reasonable level of debt, permit the raising of 
                needed equity capital, and cover the effects of 
                inflation; and
                  (B) attract and retain capital in amounts 
                adequate to provide a sound transportation 
                system in the United States.
          (3) On the basis of the standards and procedures 
        described in paragraph (2), the Board shall annually 
        determine which rail carriers are earning adequate 
        revenues.
  (b) [The Board may begin a proceeding under this section only 
on complaint.] The Board may begin a proceeding under 
subsection (a)(1) on its own initiative or upon complaint, 
except that a proceeding to determine the reasonableness of the 
level of a rate charged by a carrier may only be initiated upon 
complaint. A complaint under subsection (a) of this section 
must be made under section 11701 of this title, but the 
proceeding may also be in extension of a complaint pending 
before the Board.
  (c) In a proceeding to challenge the reasonableness of a 
rate, the Board shall make its determination as to the 
reasonableness of the challenged rate--
          (1) within 9 months after the close of the 
        administrative record if the determination is based 
        upon a stand-alone cost presentation; or
          (2) within 6 months after the close of the 
        administrative record if the determination is based 
        upon the methodology adopted by the Board pursuant to 
        section 10701(d)(3).
  (d) [Within 9 months after January 1, 1996, the Board shall 
establish procedures to ensure expeditious handling of 
challenges to the reasonableness of railroad rates.]  [The](1) 
The Board shall maintain procedures to ensure expeditious 
handling of challenges to the reasonableness of railroad rates. 
The procedures shall include appropriate measures for avoiding 
delay in the discovery and evidentiary phases of such 
proceedings and exemption or revocation proceedings, including 
appropriate sanctions for such delay, and for ensuring prompt 
disposition of motions and interlocutory administrative 
appeals.
          (2)(A) Except as provided under subparagraph (B), in 
        a stand-alone cost rate challenge, the Board shall 
        comply with the following timeline:
                          (i) For discovery, completion not 
                        later than 150 days after the date that 
                        the challenge is initiated.
                          (ii) For development of the 
                        evidentiary record, completion not 
                        later than 155 days after the date that 
                        discovery is complete under clause (i).
                          (iii) For submission of a closing 
                        brief, submission not later than 60 
                        days after the date that development of 
                        the evidentiary record is complete 
                        under clause (ii).
                          (iv) For a final Board decision, 
                        issuance not later than 180 days after 
                        the date that the evidentiary record is 
                        complete under clause (ii).
                  (B) The Board may extend a timeline under 
                subparagraph (A) after a request from any party 
                or in the interest of due process.

Sec. 10709. Contracts

  (a) One or more rail carriers providing transportation 
subject to the jurisdiction of the Board under this part may 
enter into a contract with one or more purchasers of rail 
services to provide specified services under specified rates 
and conditions.
  (b) A party to a contract entered into under this section 
shall have no duty in connection with services provided under 
such contract other than those duties specified by the terms of 
the contract.
  (c)(1) A contract that is authorized by this section, and 
transportation under such contract, shall not be subject to 
this part, and may not be subsequently challenged before the 
Board or in any court on the grounds that such contract 
violates a provision of this part.
          (2) The exclusive remedy for any alleged breach of a 
        contract entered into under this section shall be an 
        action in an appropriate State court or United States 
        district court, unless the parties otherwise agree. 
        This section does not confer original jurisdiction on 
        the district courts of the United States based on 
        section 1331 or 1337 of title 28, United States Code.
  (d)(1) A summary of each contract for the transportation of 
agricultural products (including grain, as defined in section 3 
of the United States Grain Standards Act (7 U.S.C. 75) and 
products thereof) entered into under this section shall be 
filed with the Board, containing such nonconfidential 
information as the Board prescribes. The Board shall publish 
special rules for such contracts in order to ensure that the 
essential terms of the contract are available to the general 
public.
          (2) Documents, papers, and records (and any copies 
        thereof) relating to a contract described in subsection 
        (a) shall not be subject to the mandatory disclosure 
        requirements of section 552 of title 5.
  (e) Any lawful contract between a rail carrier and one or 
more purchasers of rail service that was in effect on October 
1, 1980, shall be considered a contract authorized by this 
section.
  (f) A rail carrier that enters into a contract as authorized 
by this section remains subject to the common carrier 
obligation set forth in section 11101, with respect to rail 
transportation not provided under such a contract.
  (g)(1) No later than 30 days after the date of filing of a 
summary of a contract under this section, the Board may, on 
complaint, begin a proceeding to review such contract on the 
grounds described in this subsection.
          (2)(A) A complaint may be filed under this 
        subsection--
                          (i) by a shipper on the grounds that 
                        such shipper individually will be 
                        harmed because the proposed contract 
                        unduly impairs the ability of the 
                        contracting rail carrier or carriers to 
                        meet their common carrier obligations 
                        to the complainant under section 11101 
                        of this title; or
                          (ii) by a port only on the grounds 
                        that such port individually will be 
                        harmed because the proposed contract 
                        will result in unreasonable 
                        discrimination against such port.
                  (B) In addition to the grounds for a 
                complaint described in subparagraph (A) of this 
                paragraph, a complaint may be filed by a 
                shipper of agricultural commodities on the 
                grounds that such shipper individually will be 
                harmed because--
                          (i) the rail carrier has unreasonably 
                        discriminated by refusing to enter into 
                        a contract with such shipper for rates 
                        and services for the transportation of 
                        the same type of commodity under 
                        similar conditions to the contract at 
                        issue, and that shipper was ready, 
                        willing, and able to enter into such a 
                        contract at a time essentially 
                        contemporaneous with the period during 
                        which the contract at issue was 
                        offered; or
                          (ii) the proposed contract 
                        constitutes a destructive competitive 
                        practice under this part.
          (1) In making a determination under clause (ii) of 
        this subparagraph, the Board shall consider the 
        difference between contract rates and published single 
        car rates.
                  (C) For purposes of this paragraph, the term 
                ``unreasonable discrimination'' has the same 
                meaning as such term has under section 10741 of 
                this title.
          (3)(A) Within 30 days after the date a proceeding is 
        commenced under paragraph (1) of this subsection, or 
        within such shorter time period after such date as the 
        Board may establish, the Board shall determine whether 
        the contract that is the subject of such proceeding is 
        in violation of this section.
                  (B) If the Board determines, on the basis of 
                a complaint filed under paragraph (2)(B)(i) of 
                this subsection, that the grounds for a 
                complaint described in such paragraph have been 
                established with respect to a rail carrier, the 
                Board shall, subject to the provisions of this 
                section, order such rail carrier to provide 
                rates and service substantially similar to the 
                contract at issue with such differentials in 
                terms and conditions as are justified by the 
                evidence.
  [(h)(1) Any rail carrier may, in accordance with the terms of 
this section, enter into contracts for the transportation of 
agricultural commodities (including forest products, but not 
including wood pulp, wood chips, pulpwood or paper) involving 
the utilization of carrier owned or leased equipment not in 
excess of 40 percent of the capacity of such carrier's owned or 
leased equipment by major car type (plain boxcars, covered 
hopper cars, gondolas and open top hoppers, coal cars, bulkhead 
flatcars, pulpwood rackcars, and flatbed equipment, including 
TOFC/COFC).
          [(2) The Board may, on request of a rail carrier or 
        other party or on its own initiative, grant such relief 
        from the limitations of paragraph (1) of this 
        subsection as the Board considers appropriate, if it 
        appears that additional equipment may be made available 
        without impairing the rail carrier's ability to meet 
        its common carrier obligations under section 11101 of 
        this title.
          [(3)(A) This subsection shall cease to be effective 
        after September 30, 1998.
                  [(B) Before October 1, 1997, the National 
                Grain Car Council and the Railroad-Shipper 
                Transportation Advisory Council shall make 
                recommendations to Congress on whether to 
                extend the effectiveness of or otherwise modify 
                this subsection.]

                 SUBTITLE IV. INTERSTATE TRANSPORTATION

                              PART A. RAIL

     CHAPTER 117. ENFORCEMENT: INVESTIGATIONS, RIGHTS, AND REMEDIES

Sec. 11701. General authority

  (a) Except as otherwise provided in this part, the Board may 
begin an investigation under this part [only on complaint] on 
the Board's own initiative or on complaint. If the Board finds 
that a rail carrier is violating this part, the Board shall 
take appropriate action to compel compliance with this part.
  (b) A person, including a governmental authority, may file 
with the Board a complaint about a violation of this part by a 
rail carrier providing transportation or service subject to the 
jurisdiction of the Board under this part. The complaint must 
state the facts that are the subject of the violation. The 
Board may dismiss a complaint it determines does not state 
reasonable grounds for investigation and action. However, the 
Board may not dismiss a complaint made against a rail carrier 
providing transportation subject to the jurisdiction of the 
Board under this part because of the absence of direct damage 
to the complainant.
  (c) A formal investigative proceeding begun by the Board 
under subsection (a) of this section is dismissed automatically 
unless it is concluded by the Board with administrative 
finality by the end of the third year after the date on which 
it was begun.

Sec. 11708. Voluntary arbitration of certain rail rates, practices, and 
                    common carrier service disputes

  (a) In General.--Not later than 1 year after the date of 
enactment of the Surface Transportation Board Reauthorization 
Act of 2014, the Board shall promulgate regulations to 
establish a voluntary, but binding, arbitration process to 
resolve rail rate, practice, and common carrier service 
expectation complaints subject to the jurisdiction of the 
Board.
  (b) Covered Disputes.--The binding arbitration process--
          (1) shall apply to disputes involving rates, 
        demurrage, accessorial charges, misrouting or 
        mishandling of rail cars, and disputes involving a 
        carrier's published rules and practices as applied to 
        particular rail transportation;
          (2) shall not apply to--
                  (A) disputes to obtain the grant, denial, 
                stay, or revocation of any license, 
                authorization, or exemption, or to prescribe 
                for the future any conduct, rules, or results 
                of general, industry-wide applicability, or to 
                enforce a labor protective condition; and
                  (B) disputes solely between 2 or more rail 
                carriers; and
          (3) shall not prevent parties from independently 
        seeking or utilizing private arbitration services to 
        resolve any disputes they may have.
  (c) Arbitration Procedures.--
          (1) In general.--The Board--
                  (A) may make the voluntary, but binding, 
                arbitration process available only to the 
                relevant parties--
                          (i) after the filing of a formal 
                        complaint;
                          (ii) upon petition by all parties at 
                        the conclusion of any informal dispute 
                        resolution process provided by the 
                        Board for a complaint subject to this 
                        section; or
                          (iii) through current or future 
                        procedures adopted by the Board to 
                        facilitate voluntary, but binding, 
                        arbitration;
                  (B) with respect to rate disputes, may make 
                the binding arbitration process available only 
                to the relevant parties if the rail carrier has 
                market dominance, as determined under section 
                10707 of this title; and
                  (C) shall determine whether to pursue the 
                binding arbitration process not later than 30 
                days after the date that a petition or formal 
                complaint is filed.
          (2) Limitation.--Initiation of the binding 
        arbitration process shall preclude the Board from 
        separately reviewing a complaint or dispute related to 
        the same rail rate, practice, or common carrier service 
        expectation in a covered dispute involving the same 
        parties.
          (3) Rates.--In resolving a covered dispute involving 
        the reasonableness of a rail carrier's rates, the 
        arbitrator or panel of arbitrators, as applicable, 
        shall consider the Board's methodologies for setting 
        maximum lawful rates, giving due consideration to the 
        need for differential pricing to permit a rail carrier 
        to collect adequate revenues within the meaning of 
        section 10704(a)(2).
          (4) Service expectations.--In resolving a dispute 
        involving common carrier service expectations, the 
        arbitrator or panel of arbitrators, as applicable, 
        shall consider the rates and service terms, and any 
        changes thereto, as published or otherwise made 
        available under subsection (b), (c), or (d) of section 
        11101.
  (d) Arbitration Decisions.--Any decision reached in an 
arbitration process under this section--
          (1) shall--
                  (A) be in writing;
                  (B) contain findings of fact and conclusions; 
                and
                  (C) be binding upon the parties; and
          (2) shall not have any precedential effect in any 
        other or subsequent arbitration dispute.
  (e) Timelines.--
          (1) Selection.--An arbitrator or panel of arbitrators 
        shall be selected not later than 14 days after the date 
        of the Board's decision to initiate arbitration.
          (2) Evidentiary process.--The evidentiary process of 
        the binding arbitration process shall be completed not 
        later than 90 days after the date that the arbitration 
        process is initiated, unless a party requests an 
        extension and the arbitrator or panel of arbitrators, 
        as applicable, grants it.
          (3) Decision.--The arbitrator or panel of 
        arbitrators, as applicable, shall issue a decision not 
        later than 30 days after the date that the evidentiary 
        record is closed.
          (4) Extensions.--The Board may extend any of the 
        timelines in this subsection upon the agreement of all 
        parties in the dispute.
  (f) Arbitrators.--
          (1) In general.--Unless otherwise agreed by all of 
        the parties, an arbitration under this section shall be 
        conducted by a panel of arbitrators, selected from a 
        roster, maintained by the Board, of persons with rail 
        transportation, economic regulation, professional or 
        business experience, including agriculture, in the 
        private sector.
          (2) Selection.--
                  (A) In general.--If the parties cannot 
                mutually agree on an arbitrator, or the lead 
                arbitrator of a panel of arbitrators, the 
                parties shall select the arbitrator or lead 
                arbitrator from the roster by alternately 
                striking names from the roster until only 1 
                name remains.
                  (B) Panel of arbitrators.--For purposes of 
                this section, a panel of arbitrators shall be 
                selected as follows:
                          (i) The parties to a dispute may 
                        mutually select 1 arbitrator from the 
                        roster to serve as the lead arbitrator 
                        of the panel of arbitrators.
                          (ii) If the parties cannot mutually 
                        agree on a lead arbitrator, the parties 
                        shall select a lead arbitrator using 
                        the process described in subparagraph 
                        (A).
                          (iii) In addition to the lead 
                        arbitrator selected under this 
                        subparagraph, each party to a dispute 
                        shall select 1 additional arbitrator 
                        from the roster.
          (3) Cost.--The parties shall share the costs of the 
        arbitration equally.
  (g) Relief.--An arbitral decision under this section may 
award the payment of damages or rate prescriptive relief, but 
the value of the award shall be limited as follows:
          (1) For common carrier service and practice disputes, 
        the damage award may not exceed $2,000,000.
          (2) For rate disputes, the damage award, including 
        any rate prescription, may not exceed $25,000,000, and 
        any rate prescription shall be limited to not longer 
        than 5 years from the date of the arbitral decision.
  (h) Board Review.--If a party appeals a decision under this 
section to the Board, the Board may review the decision under 
this section to determine if--
          (1) a clear abuse of arbitral authority or discretion 
        occurred;
          (2) the decision directly contravenes statutory 
        authority; or
          (3) the award limitation under subsection (g) was 
        violated.
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